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failing to verify or provide affidavit supporting motion for continuance did not preserve issue regarding same for review
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NO. 09-11-00261-CV
04-26-2012
ERIC C. SMALLEY, INDEPENDENT ADMINISTRATOR OF THE ESTATE OF JOHN HUBERT SMALLEY, III, Appellant v. LISA M. SMALLEY, Appellee
On Appeal from the County Court at Law No. 1
Montgomery County, Texas
Trial Cause No. 10-07-07970-CV
MEMORANDUM OPINION
Eric C. Smalley, Independent Administrator of the Estate of John Hubert Smalley, III, deceased, filed an original petition for post-divorce division of property under section 9.201 of the Texas Family Code, in which he alleged that John Hubert Smalley, III's Federal Employees Group Life Insurance ("FEGLI") policy had not been disposed of by the divorce decree dissolving the marriage of John and Lisa M. Smalley. Lisa filed a traditional and no-evidence motion for summary judgment, which the trial court granted. In two appellate issues, Eric challenges the trial court's decision to grant Lisa's summary judgment motion and to award appellate attorney's fees to Lisa. We affirm the trial court's judgment in part, and reverse and remand in part.
Summary Judgment
In issue one, Eric contends that the trial court erred by granting Lisa's traditional and no-evidence summary judgment motion.
We review a trial court's ruling on a traditional summary judgment motion de novo. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 215 (Tex. 2003). We "must consider whether reasonable and fair-minded jurors could differ in their conclusions in light of all of the evidence presented." Goodyear Tire & Rubber Co. v. Mayes, 236 S.W.3d 754, 755 (Tex. 2007) (per curiam). "We consider all the evidence in the light most favorable to the nonmovant, indulging every reasonable inference in favor of the nonmovant and resolving any doubts against the motion." Id. at 756.
"A no-evidence summary judgment motion . . . is essentially a motion for a pretrial directed verdict; it requires the nonmoving party to present evidence raising a genuine issue of material fact supporting each element contested in the motion." Timpte Indus. v. Gish, 286 S.W.3d 306, 310 (Tex. 2009). We review the summary judgment evidence in the light most favorable to the party against whom summary judgment was rendered. Id. We credit evidence favorable to that party if reasonable jurors could and disregard contrary evidence unless reasonable jurors could not. Id.
Lisa was the designated beneficiary of John's FEGLI policy. After John's death, the proceeds of John's policy were paid to Lisa. In the trial court, Eric sought to have the Smalley's divorce decree reformed to award John's policy to his estate, to divest Lisa of any interest in John's policy, and to impose a constructive trust on the insurance proceeds that Lisa had received upon John's death. In her summary judgment motion, Lisa argued that Eric was not entitled to a constructive trust because there had been no fraud, breach of fiduciary duty, or breach of the decree, and Eric had not pleaded breach or fraud. The trial court modified the decree to make the estate owner of John's FEGLI policy, but declined to impose a constructive trust on the proceeds of John's policy.
On appeal, Eric does not dispute Lisa's entitlement to the proceeds, but challenges her right to retain the proceeds. He contends that, had the original divorce decree awarded John's FEGLI policy to John, Lisa would have been divested of any interest in John's policy. He argues that spouses owe a fiduciary duty to each other, which he alleges Lisa breached by failing to ensure that all marital property was disclosed and included in the decree. According to Eric, this alleged breach resulted in constructive fraud.
The Federal Employees Group Life Insurance Act ("FEGLIA") outlines the order in which FEGLI policy proceeds must be paid and states that the designated beneficiary is the first party to whom FEGLI proceeds must be disbursed. See 5 U.S.C.A. § 8705 (2007). No statutory provision precludes the use of the equitable remedy of constructive trust once the proceeds of a FEGLI policy are in the beneficiary's hands. Roberts v. Roberts, 560 S.W.2d 438, 439 (Tex. App.—Beaumont 1977, writ ref'd n.r.e.); see Fagan v. Chaisson, 179 S.W.3d 35, 42 (Tex. App.—San Antonio 2005, no pet.). The purpose of section 8705 is to provide for the speedy and economic settlement of insurance claims and this purpose "is not thwarted by imposition of a constructive trust after the proceeds have been paid in accordance with the statute." Fagan, 179 S.W.3d at 42-43.
A constructive trust may be imposed where the plaintiff establishes: (1) breach of a special trust, breach of a fiduciary relationship, actual fraud, or constructive fraud; (2) unjust enrichment of the wrongdoer; and (3) tracing to an identifiable res.Hubbard v. Shankle, 138 S.W.3d 474, 485-86 (Tex. App.—Fort Worth 2004, pet. denied). The plaintiff must strictly prove the elements necessary for the imposition of the trust. Id. In this case, Lisa moved for summary judgment on the first element, and the issue became whether Lisa owed a fiduciary duty to John and breached that duty, thereby resulting in constructive fraud.
Eric cites Cocke v. Pac. Gulf Dev. Corp., 594 S.W.2d 545 (Tex. App.—Houston [1st Dist.] 1980, no pet.) for the proposition that a constructive trust may also be imposed when funds are paid to one party but, in equity and good conscience, should be transferred to another party. Cocke, 594 S.W.2d at 548. In this case, John's FEGLI policy proceeds were not mistakenly paid to Lisa, but were properly paid to Lisa in accordance with FEGLIA. See 5 U.S.C.A. § 8705 (2007).
Spouses generally owe a fiduciary duty to one another. Boaz v. Boaz, 221 S.W.3d 126, 133 (Tex. App.—Houston [1st Dist.] 2006, no pet.). However, "adverse parties who have retained professional counsel, including husbands and wives in a suit for divorce, do not owe fiduciary duties to one another[,]" but a duty to speak still exists when the parties to a mediated settlement agreement have represented to one another that they have each disclosed the marital property known to them. Boyd v. Boyd, 67 S.W.3d 398, 405 (Tex. App.—Fort Worth 2002, no pet.).
We first note that although Eric's pleadings allege unjust enrichment, his pleadings do not contain any specific allegations of fraud or breach to support imposition of a constructive trust. See Troxel v. Bishop, 201 S.W.3d 290, 298 (Tex. App.—Dallas 2006, no pet.); see also Auto. Ins. Co. v. Young, 85 S.W.3d 334, 337 (Tex. App.— Amarillo 2002, no pet.). Moreover, Eric failed to present evidence raising a genuine issue of material fact regarding his claim for a constructive trust. The record indicates that John and Lisa were each represented by counsel and entered an agreement through mediation. The divorce decree contains no language suggesting that the parties represented that they had made a fair and reasonable disclosure of the property known to them. See Boyd, 67 S.W.3d at 404-06 (Husband bore a duty to speak when mediated settlement agreement provided that "[e]ach party represents that they have made a fair and reasonable disclosure to the other of the property and financial obligations known to them."). Nor does the decree contain language requiring John to designate a specific beneficiary other than Lisa. See Fagan, 179 S.W.3d at 38, 42, 45 (Former wife was entitled to a constructive trust on the proceeds of former husband's FEGLI policy because the divorce decree awarded wife 50% of husband's federal retirement benefits and 100% of the community interest in any property not disclosed by husband); see also Roberts, 560 S.W.2d at 438-40 (A constructive trust was proper because the divorce decree required FEGLI policy proceeds to be paid to the insured's children, but the insured breached the decree by designating his new wife as the beneficiary.). Once Lisa established her right to summary judgment, Eric bore the burden of coming forward with evidence or law to preclude summary judgment. See Chandler v. Gene Messer Ford, Inc., 81 S.W.3d 493, 498 (Tex. App.—Eastland 2002, pet. denied). Eric did not present any evidence raising a fact issue on whether Lisa owed a fiduciary duty to John and breached any such fiduciary duty. See Hubbard, 138 S.W.3d at 483; see also Chandler, 81 S.W.3d at 498.
Eric contends that he was unable to present evidence of fraud or breach because he did not have an adequate time for discovery. When a party contends that he has not had an adequate opportunity for discovery before a summary judgment hearing, he must file either an affidavit explaining the need for further discovery or a verified motion for continuance. Tenneco Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 647 (Tex. 1996). Although Eric filed a motion for continuance, his motion was unverified, and he did not provide an affidavit explaining his need for further discovery. Eric's complaint that he did not have adequate time for discovery is not preserved for our review. See Osborne v. Normand, No. 09-06-513 CV, 2008 Tex. App. LEXIS 1784, at **5-6 (Tex. App.— Beaumont Mar. 13, 2008, no pet.) (mem. op.); see also Bradford Partners II, L.P. v. Fahning, 231 S.W.3d 513, 520-21 (Tex. App.—Dallas 2007, no pet.).
Viewing the evidence in the light most favorable to Eric, we conclude that there are no genuine issues of material fact, and Lisa was entitled to summary judgment as a matter of law. See Tex. R. Civ. P. 166a(c), (i); see also Gish, 286 S.W.3d at 310; Knott, 128 S.W.3d at 215; Mayes, 236 S.W.3d at 755. Because summary judgment was proper on both traditional and no-evidence grounds, we overrule issue one.
Attorney's Fees
In issue two, Eric contends that the trial court abused its discretion by awarding appellate attorney's fees to Lisa. Eric argues that if John's policy was mistakenly omitted from the decree or was omitted as a result of constructive fraud, it is not just and right for the estate to bear the costs of all attorney's fees. He complains that the appellate attorney's fees award is excessive, punitive, and unconditional.
In a proceeding to divide property previously undivided in a decree of divorce, the trial court may award reasonable attorney's fees. Tex. Fam. Code Ann. § 9.205 (West Supp. 2011). We review a trial court's award of attorney's fees for abuse of discretion. Bigelow v. Stephens, 286 S.W.3d 619, 623 (Tex. App.—Beaumont 2009, no pet.).
At a hearing, Lisa's counsel testified that he was licensed as an attorney in 1995, has practiced law for sixteen years, is familiar with rates charged in Montgomery County, has handled numerous estate and insurance-related cases, and has previously testified as an expert on attorney's fees. He provided charts, invoices, and testimony to show that his hourly rate is $350 and that his associate's hourly rate is $195, for an average hourly rate of $316. Counsel opined that his hourly rates fit within the range of those customarily assessed in Montgomery County.
In the context of attorney's fees for trial work, counsel testified to the factors enumerated in Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex. 1997), and explained in detail how these factors supported an award of trial attorney's fees. Regarding attorney's fees for appellate work, counsel testified that he has handled several appeals, including three recent and favorable appeals to this Court. He testified that $85,000 would be reasonable and necessary. Regarding appeal to the Texas Supreme Court, counsel testified that he recently completed an appeal to the Supreme Court and that a petition for review was denied in a case that he had won at the intermediate appellate level. He explained that he is aware of the time and costs involved in responding to a petition for review in the Supreme Court. He opined that $25,000 is a necessary and reasonable fee. In the event briefing on the merits was required, counsel explained that he has worked with other attorneys in such circumstances and is familiar with the "scope and effort" required, which includes recycling trial and appellate materials. He opined that $60,000 would be a reasonable and necessary fee if briefing on the merits or oral argument was required by the Supreme Court.
On cross-examination, Lisa's counsel testified that the $85,000 in appellate attorney's fees represented approximately 250 hours or triple the amount of trial time. He explained that he had already performed a substantial amount of research, but that "a substantial additional amount of research [] would be required" should the case proceed to the appellate level. Counsel described another case that involved an issue in which summary judgment was granted and opposing counsel pursued an appeal. Counsel testified that this appeal involved briefing, oral argument, and a decision in his client's favor. He explained that a lot of work was not done at the trial level, but that the appeal involved "an extensive amount of work and additional research[.]" He stated, "Even where a matter has been handled on summary judgment and has been ruled on in trial court, even with ability to recycle some of the research and use it, unfortunately the Court of Appeals is a whole new ball game and required a lot of additional work." He testified that the appellate attorney's fees in that case greatly exceeded the amount of trial attorney's fees and he anticipated the same in any appeal of this case. He further testified that the case was then appealed to the Texas Supreme Court and a response to the petition for review cost "just shy of $25,000." He explained that an appeal to the Supreme Court involved research, briefing, and preparation for any oral argument.
Eric did not dispute the amount of trial attorney's fees. Eric's counsel argued that the appellate attorney's fees were more punitive than realistic. The trial court, however, awarded Lisa $50,000 for appeal to the appellate court, $20,000 for appeal to the Texas Supreme Court, and $40,000 for briefing or oral argument in the Texas Supreme Court.
Because Eric did not prevail on his claim for a constructive trust, the trial court properly awarded appellate attorney's fees to Lisa. See Messina v. Messina, No. 01-07-00277-CV, 2008 Tex. App. LEXIS 5570, at *15 (Tex. App.—Houston [1st Dist.] July 24, 2008, pet. denied) (mem. op.). An award of attorney's fees must not be "excessive or extreme, but rather moderate or fair." Garcia v. Gomez, 319 S.W.3d 638, 642 (Tex. 2010). Additionally, a trial court abuses its discretion by awarding attorney's fees absent sufficient supporting evidence. Bocquet v. Herring, 972 S.W.2d 19, 21 (Tex. 1998). Testimony from an interested witness is taken as true when that testimony is not contradicted by any other witness or attendant circumstances, is clear, direct and positive, and is free from contradiction, inaccuracies, and circumstances tending to cast suspicion. Ragsdale v. Progressive Voters League, 801 S.W.2d 880, 882 (Tex. 1990). While an attorney's testimony is some evidence of a reasonable fee, it is not conclusive. Garcia, 319 S.W.3d at 642.
When evaluating the reasonableness of attorney's fees, we consider
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly; (2) the likelihood . . . that the acceptance of the particular employment will preclude other employment by the lawyer; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer orArthur Andersen, 945 S.W.2d at 818. When determining whether attorney's fees are excessive, we consider the entire record and decide the issue in the light of the testimony, the amount in controversy, the nature and complexities of the case, and the common knowledge and experiences of the justices as lawyers and judges. Gorman v. Countrywood Prop. Owners Ass'n, 1 S.W.3d 915, 920 (Tex. App.—Beaumont 1999, pet. denied).
lawyers performing the services; and (8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.
We first note that the issues in this case are not so complex as to require extensive time and labor during the appellate process, particularly in light of the substantial time and labor already invested by Lisa's counsel at the trial level. The record does not indicate that Lisa's counsel applied the Arthur Andersen factors when testifying to appellate attorney's fees. Counsel did not identify the cases in which he had participated on an appellate level, describe the details of those cases, or explain how those cases were similar to the instant case in terms of parties, issues, facts, and complexity. Nor did counsel explain why the issues involved in this case would require 250 hours of additional work at the intermediate appellate level or seventy-eight hours of additional work before the Supreme Court. His general statements regarding the "scope and effort required" and the need for "substantial additional research" or "additional work" do not support the substantial amount of appellate attorney's fees awarded by the trial court in this case. Moreover, the trial court's award is not conditioned upon success on appeal.
Lisa concedes that the award is unconditional.
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Viewing the entire record in light of counsel's testimony, the amount in controversy, the nature and complexities of the case, and our common knowledge and experience, we conclude that the trial court's award of $110,000 in appellate attorney's fees is excessive. See Gorman, 1 S.W.3d at 920. The award is lacking in evidentiary support, is not contingent upon Lisa's success on appeal, and constitutes an abuse of discretion. See Bocquet, 972 S.W.2d at 21; see also Marcus v. Smith, 313 S.W.3d 408, 418 (Tex. App.—Houston [1st Dist.] 2009, no pet.). For these reasons, we sustain Eric's second issue.
In summary, we affirm the trial court's judgment granting Lisa's summary judgment motion. We reverse the trial court's judgment awarding appellate attorney's fees to Lisa and we remand the cause for further proceedings consistent with this opinion.
AFFIRMED IN PART; REVERSED AND REMANDED IN PART.
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STEVE McKEITHEN
Chief Justice
Before McKeithen, C.J., Gaultney and Kreger, JJ.
DISSENTING OPINION
The equitable remedy of constructive trust attempts to correct injustice by requiring a party to convey property to another when retention of the property would result in unjust enrichment. See Meadows v. Bierschwale, 516 S.W.2d 125, 131 (Tex. 1974); Hatton v. Turner, 622 S.W.2d 450, 458 (Tex. Civ. App.—Tyler 1981, no writ); Cocke v. Pac. Gulf Dev. Corp., 594 S.W.2d 545, 548-49 (Tex. Civ. App.—Houston [1st Dist.] 1980, no writ); see generally Pac. Indem. Co. v. Grand Ave. State Bank of Dallas, 223 F.2d 513, 517-18 (5th Cir. 1955). This Court and others have upheld the imposition of constructive trusts to avoid unjust enrichment when money that should have been paid to a party was paid to another. See Fagan v. Chaisson, 179 S.W.3d 35, 42 (Tex. App.— San Antonio 2005, no pet.); Squires v. Squires, 673 S.W.2d 681, 684 (Tex. App.— Corpus Christi 1984, no writ); Roberts v. Roberts, 560 S.W.2d 438, 439-40 (Tex. Civ. App.—Beaumont 1977, writ ref'd n.r.e); see also Pacific Indem. Co., 223 F.2d at 517-18. The plaintiff is not required to plead or prove fraud or breach of fiduciary duty. See generally Meadows, 516 S.W.2d at 131; Omohundro v. Matthews, 161 Tex. 367, 341 S.W.2d 401, 405 (1960). The motion for summary judgment was based on a lack of evidence of something that was not required to establish a constructive trust.
There is a fundamental problem with plaintiff's case, and with the award of attorney fees. This was a term life policy with no cash value. John Smalley could have changed the beneficiary after the divorce, and Lisa Smalley could not have filed a petition for post-divorce division of property under section 9.201 during his life. See Tex. Fam. Code Ann. § 9.201 (West 2011). That section does not apply and cannot support appellant's case. Section 9.205 authorizes attorney fees when subchapter C applies. See Tex. Fam. Code Ann. § 9.205 (West Supp. 2011). No attorney fees may be recovered under that provision by either party because that subchapter does not apply here. Of course, that was not the basis for the motion for summary judgment, and the issue is not argued on appeal. But if we are sending the case back, we should reverse the entire judgment and allow the parties the opportunity to seek appropriate relief under applicable law.
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DAVID GAULTNEY
Justice